Well, it’s been several days now since the IRS opened the
“flood-gates” for e-filing, but we are all asking, “Where are the
customers?” Business has been very slow
for most of us. Is it because some many
were out of work last year? I do not
know the answer to that question. If you
are one of those who was out of work for most of – or, all of - the past year,
you may still have to file a return.
I’ll address that later, however.
Let’s talk about Earned Income Tax Credit (EITC) for a few
moments, shall we? The EITC has been
around for some 30 years, with its roots beginning back in the first Reagan
term. IRS Pub 596 has a wealth of
information on the subject (may be even a little more than you really wanted to
know!). This is the most common
“refundable” credit, meaning the taxpayer may get a refund regardless of their
tax liability. To qualify, the first
thing is the taxpayer must have “earned” income. We call that “sweat-of-the-brow” income –
this is income that you WORKED for!
Typically, this is wages, or tips, or self-employment income. Savings account interest, dividends,
unemployment, pension, and Social Secuity income is considered “unearned” income.
You must be over the age of 24 and under 65, or be filing
Married Filing Jointly, Head of Household, Single or Qualifying Widow(er) with
a qualifying child. A “qualifying child”
must be related to the taxpayer, under the age of 19 or under 24 if they are a
full-time student for at least 5 months of the previous year, have lived with
the taxpayer more than half of 2012, and the “qualifying child” cannot file a
joint return for the year. Boy, that’s a
mouthful, isn’t it?
Now, those are general rules, and, of course, you should
always consult your tax advisor about your particular situation.
This year there are new rules pertaining to “Due Diligence
Requirements” for paid preparers. Those
requirements are contained in Form 8867.
You may be asked to provided some additional documentation if you are
claiming children for the EIC.
Please feel free to contact me with your questions or
comments regarding this subject.
Raymond D. Nations, EA
Liberty Tax Service
If you find yourself in the lion’s den with the IRS,
Call me, Raymond D. Nations, Enrolled Agent, and I’ll tame